Michael Gove's plan to slash sports funding in schools splits cabinet

A battle is raging at the heart of government over a decision by the education secretary, Michael Gove, to slash £162m of sports funding in English schools as the country prepares for the 2012 Olympics and bids for the 2018 World Cup.

The Observer has learned that fears about sports provision being cut back dramatically in the state sector have been voiced in cabinet by the deputy prime minister, Nick Clegg, and the health secretary, Andrew Lansley.

Gove's decision to end all ring-fenced funding for sport – which would threaten most after-school clubs and severely reduce the number of trained PE teachers and sports coaches – has also caused dismay among MPs, leading athletes and the teaching establishment. Many sports co-ordinators have already been told they will not have a job after the end of the financial year in March.

One senior figure close to the discussion said it was an "atrocious decision" that ran contrary to efforts to build an Olympic legacy – and to David Cameron's vision of a "big society". It comes just weeks before the prime minister travels to Switzerland to support England's bid for the World Cup.